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Question # 1 of 20
Coupon securities
Consols
Preferred Bonds
Total Marks: 1
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Question # 5 of 20 ( Start time: 08:03:08 PM )
Total Marks: 1
Coupon rate
Yield to maturity
Current yield
Total Marks: 1
Risk
Profit
Probability
Lose
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Question # 7 of 20 ( Start time: 08:04:42 PM )
Total Marks: 1
The interest rate that is involved in _____________ calculation is referred to as discount rate
Present value
Future value
Intrinsic value
Discount value
Total Marks: 1
Government bond
Treasury bond
Corporate bond
Callable Bonds
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Question # 13 of 20 ( Start time: 08:13:26 PM )
Total Marks: 1
If a bond sells at a premium, where price exceeds face value, then we would expect to see:
Total Marks: 1
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Question # 15 of 20 ( Start time: 08:16:14 PM )
Total Marks: 1
More risky
Less risky
Fixed return
Less dividend
Total Marks: 1
Which of the following best expresses the proceeds a lender receives from a simple loan?
PV(1 + i)
FV/i
PV + i
PV/i
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Question # 17 of 20 ( Start time: 08:18:11 PM )
Total Marks: 1
Bond
Bank Loan
Home Mortgage
Futures Contract
Total Marks: 1
According to the rule of 72 for reasonable rates of return, the time it takes to __________ the
money will be t =72/i%
Doubles
Triples
halves
3/4
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Question # 19 of 20 ( Start time: 08:19:37 PM )
Total Marks: 1
Total Marks: 1
Home mortgages
Home loan
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Question # 2 of 20
When a bond becomes more liquid relative to its alternatives, the demand curve for bonds shifts
to the:
Right
Left
No change
Question # 4 of 20
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Question # 5 of 20
Always prefer an investment with a certain return to one with the same expected return but
any amount of uncertainty
Question # 9 of 20
Total Marks: 1
Which of the following best represent the true relationships between interest rates and bond
prices?
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Question # 10 of 20
Total Marks: 1
Which one of the following is a component of wealth that is held in a readily spendable form?
Money
Bonds
Stocks
Income
Question # 11 of 20
Total Marks: 1
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Question # 13 of 20 ( Start time: 08:41:14 PM )
Financial Instruments
Financial Markets
Financial Institutions
Central Banks
Question # 14 of 20
Total Marks: 1
Which of the following statement is true about the relation ship between bond ,coupon payment
and interest?
Coupon payments fall, the interest rate falls, and Bond price will rise
Coupon payments rises, the interest rate falls, and Bond price will rise
Coupon payments fall, the interest rate falls, and Bond price will fall
Coupon payments rise, the interest rate falls, and Bond price will fall
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Question # 15 of 20
Total Marks: 1
The current yield on a $10,000, 5% coupon bond selling for $8,000 is:
5.00%
6.25%
7.50%
8.00%
Question # 19 of 20
Total Marks: 1
There is no guarantee that a bond issuer will make the promised payments is known as which
one of the following?
Default risk
Inflation risk
Systematic risk
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Question # 20 of 20
Total Marks: 1
What will be the result of the difference of real and nominal interest rate?
Question # 1 of 20
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Question # 2 of 20
Question # 3 of 20
Question # 4 of 20
Currency
Stock
Bond
Commodity
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Question # 5 of 20
Beside default risk which one if the following factor affects the return on bond?
Taxes
Monetary policy
Junk bonds
Debt
The second important factor that affects the return on a bond is taxes
Which of the following is the measure of likelihood that an event will occur?
Risk
Probability
Frequency
Question # 8 of 20
According to the liquidity premium theory of the term structure, when the yield
curve has its usual slope, the market expects
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Question # 9 of 20 Home loans and car loans are the example of which one of
the following?
Mortgage loans
Pledge
Home mortgages and car loans are examples of fixed payment loans
Question # 10 of 20
Which one of the following is the procedure of finding out the Present Value
(PV)?
Discounting
Compounding
Bond pricing
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Question # 12 of 20
Considering the Liquidity Premium Theory, if investors expect short term interest
rates to decrease:
Question # 14 of 20
Risk lovers
Risk enhancers
Risk averse
Risk tolerating
Question # 15 of 20
Always prefer an investment with a certain return to one with the same
expected return but any amount of uncertainty
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Question # 16 of 20
The liquidity premium theory suggests that yield curves should usually be:
Up-sloping
Inverted
Flat
Risk
Profit
Probability
Measuring Risk
Coupon rate
Yield to maturity
Current yield
Fixed return
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Question # 20 of 20
According to the rule of 72 for reasonable rates of return, the time it takes to __________ the
money will be t =72/i%
Doubles
Triples
Halves
3/4
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Which one of the following is true for the relationship between the yield of taxable and tax exempt
bond?
Higher the tax rate wider the gap between the yield of taxable and tax exempt bond
Higher the tax rate shorter the gap between yield of taxable and tax exempt bond
Lower the tax rate wider the gap between yield of taxable and tax exempt bond
change
Takes the annual dividend, adds it to the expected future selling price and divides by the number
of years to get the current price
Takes the net present value of expected dividends and add it to the future sale price of the stock
Takes the net present value of the expected future price of the stock and add the annual dividend
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The slope of the yield curve seems to predict the performance of the economy with:
What is true about the relationship between standard deviation and risk?
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The concept of limited liability says a stockholder of a corporation:
Which of the following best describes the relationship between Bond prices and yields?
Which of the following best expresses the payment a lender receives for lending their money for
four years?
PV(1+i)4
PV/(1 + i)4
4PV
PV/(1 - i)4
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If YTM is greater than the coupon rate the price of the bond is __________.
Question # 1
Bond yield
Bond price
Bond risk
Bond ratings
Bond price
Question # 2
Which of the following statement is true for the given sentence, "that tax affects
the bond return"?
Select correct option:
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The second important factor that affects the return on a bond is taxes
Bondholders must pay income tax on the interest income they receive from
privately issued
Question # 3
The relationship between the price and the interest rate for a zero coupon bond
is best described as:
Select correct option:
Volatile
Stable
Non-existent
Inverse
Question # 4
Question # 5
Coupon bonds make the annual payments which are called as ___________.
Select correct option:
Annual payments
Fixed payments
Coupon payments
Maturity payment
Question # 6
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If information in a financial market is asymmetric, this means:
Select correct option:
Question # 7
If YTM equals the coupon rate the price of the bond is __________.
Select correct option:
Question # 8
Facilitate Payments
Channels Funds from Savers to Borrowers
Enables Risk Sharing
All of the given options
Question # 9 of
Debt instruments is categorized on the basis of which one of the following?
Select correct option:
Question # 10
The return on holding a bond till its maturity is called:
Select correct option:
Coupon rate
Yield to maturity
Current yield
Internal rate of return
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Question # 11
Which of the following are used to monitor and stabilize the economy?
Select correct option:
Stock exchanges
Commercial Banks
Central Banks
Financial institutions
Question # 12
Markets offer a broader array of financial instruments than were available even
50 years ago
Question # 13
Requiring a large deductible on the part of an insured is one way insurers treat
the problem of:
Select correct option:
Free-riding
Moral hazard
Adverse selection
The Lemons market
Question # 14
Which one of the following is the procedure of finding out the Present Value
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(PV)?
Select correct option:
Discounting
Compounding
Time value of money
Bond pricing
Question # 15
Central bank
Commercial banks
Stock exchanges
Insurance companies
Question # 16
With direct finance we mean which of the following?
Select correct option:
Question # 17
The relationship between bond interest rates (yields) and bond prices
The relationship between liquidity and bond interest rates (yields)
The relationship between risk and bond interest rates (yields)
The relationship between time to maturity and bond interest rates (yields)
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Question # 18
In a financial market where information is symmetric:
Select correct option:
Question # 19
Other things remaining equal, the liquidity premium theory is based upon the idea
that ____________.
Select correct option:
Question # 20
Spreading involves:
Select correct option:
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Question # 2 of 20 ( Start time: 05:44:45 PM ) Total Marks: 1
The lowest rating for an investment grade bond assigned by Moody's is:
Select correct option:
BBB
ABB
Baa
Aaa
C
M1
M2
M3
Question # 4 of 20 ( Start time: 05:46:15 PM ) Total Marks: 1
The price of a coupon bond can best be described as:
Select correct option:
Money
Bonds
Stocks
Loans
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Question # 7 of 20 ( Start time: 05:47:51 PM ) Total Marks: 1
Considering the Liquidity Premium Theory, if investors expect short term interest
rates to decrease:
Select correct option:
Higher the tax rate wider the gap between the yield of taxable and tax
exempt bond
Taxable bond yield is always greater than tax exempt bond
Higher the tax rate shorter the gap between yield of taxable and tax exempt bond
Lower the tax rate wider the gap between yield of taxable and tax exempt bond
0.0065
6.50
0.650
0.0650
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Question # 11 of 20 ( Start time: 05:50:40 PM ) Total Marks: 1
Other things remaining equal, the liquidity premium theory is based upon the idea
that ____________.
Select correct option:
Shorter
Wider
No gap
Any thing can be possible
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Question # 15 of 20 ( Start time: 05:53:46 PM ) Total Marks: 1
Investors will hold higher compensation for the __________ investment.
Select correct option:
More risky
Less risky
Fixed return
Less dividend
Stock exchanges
Commercial Banks
Central Banks
Financial institutions
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Question # 20 of 20 ( Start time: 05:56:35 PM ) Total Marks: 1
The fact that common stockholders are residual claimants means:
Select correct option:
The stockholders receive their dividends before any other residuals are paid
The stockholders receive the remains after everyone else is paid
The stockholders are paid any past due dividends before other claims are paid
The common stockholders are responsible for all corporate debts
Which of the following best expresses the payment a lender receives for lending
their money for four years?
PV(1+i)4
PV/(1 + i)4
4PV
PV/(1 - i)4
Government bond
Treasury bond
Corporate bond
Callable Bonds
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Question # 3 of 20 ( Start time: 09:00:14 PM ) Total Marks: 1
__________ is the interest rate at which the present value annual reveneu
equals the cost of the investment.
Risk lovers
Risk enhancers
Risk averse
Risk tolerating
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Question # 7 of 20 ( Start time: 09:01:26 PM ) Total Marks: 1
Always prefer an investment with a certain return to one with the same
expected return but any amount of uncertainty
Traveler’s checks
Demand deposits
Currency
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Question # 9 of 20 ( Start time: 09:02:04 PM ) Total Marks: 1
The lowest rating for an investment grade bond assigned by Moody's is:
BBB
ABB
Baa
Aaa
If YTM is less than the coupon rate the price of the bond is __________.
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Question # 12 of 20 ( Start time: 09:05:29 PM ) Total Marks: 1
What will be the effect on the present value if we double the future value of the
payment?
M1
M2
M3
Money
Bonds
Stocks
Loans
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Question # 15 of 20 ( Start time: 09:07:01 PM ) Total Marks: 1
Which one of the following is the strategy of reducing overall risk by making two
investments which are totally independent of each other?
Standard deviation
Variance
Investors have no preference for short-term bonds over long-term bonds, or vice
versa
Interest rates on long-term bonds strongly influence the demand for short-term
bonds
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Question # 17 of 20 ( Start time: 09:09:36 PM ) Total Marks: 1
What will the yield curve look like if future short-term interest rates are expected
to rise sharply?
It will be horizontal
Sum of all the probabilities should be equal to which one of the following?
Zero
One
Two
Three
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Spreading involves:
Cost of investment
A means of payment
Money
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A business cycle downturn shifts the bond supply to the:
Right
Left
No change
According to the liquidity premium theory of the term structure, when the yield curve has its usual
slope, the market expects
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Bonds that are issued by Government are called _________.
Government bond
Treasury bond
Corporate bond
Callable Bonds
What will the yield curve look like if future short-term interest rates are expected to rise sharply?
It will be horizontal
The interest rate that is involved in _____________ calculation is referred to as discount rate
Present value
Future value
Intrinsic value
Discount value
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Which one of the following is true for the relationship between the yield of taxable and tax exempt
bond?
Higher the tax rate wider the gap between the yield of taxable and tax exempt bond
Higher the tax rate shorter the gap between yield of taxable and tax exempt bond
Lower the tax rate wider the gap between yield of taxable and tax exempt bond
You start with a $1000 portfolio; it loses 40% over the next year, the following year it gains 50% in
value; At the end of two years the worth of your portfolio will be:
$900
$600
$1000
$1100
1000-100 = 900
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Which of the following is NOT included in the definition of M1?
Traveler’s checks
Demand deposits
Currency
Facilitate Payments
Which one of the following agencies assesses the default risk of different issuers?
Insurance companies
Bond issuing
Credit rating
Recruitment agencies
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In which of the following bonds we may ignore the default risk?
The chance the issuer will be unable to make interest payments or repay principal
Coupon bonds make the annual payments which are called as ___________.
Annual payments
Fixed payments
Coupon payments
Maturity payment
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Q 2: Which of the following is true of a nation's central bank?
It makes important decisions about the nation's tax and public spending policies
It lends only to the nations largest and most important business firms
It has many interactions with the nation's citizens and businesses
It is responsible for conducting the nation's monetary policy
Bond
Bank Loan
Home Mortgage
Futures Contract
Q 6: If YTM equals the coupon rate the price of the bond is __________.
Select correct option:
Greater than its face value
Lower than its face value
Equals to its face value
Insufficient information
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Q 7: An increase in the expected inflation shifts the bond demand to the
_________. Select correct option:
Right
Left
No change
All of the given options
Present value
Future value
Intrinsic value
Discount value
Q 10: Debt instruments are categorized on the basis of which one of the
following?
Select correct option:
Banks
Securities firms
Stock exchanges
Insurance companies
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Q 12: When stock prices reflect fundamental values:
Q 13: If YTM is greater than the coupon rate the price of the bond is
__________. Select correct option:
Stock
Bond
Loan
Cheque
Q 15: Without the ability of financial intermediaries to pool the resources of small
savers: Select correct option:
Borrowers needing large amounts of money would find it less costly to obtain the
funds
The economy would likely grow faster
People would likely save more
The risk associated with lending would increase
Q 16: A bank can usually offer a saver a higher return for the same risk because:
Select correct option:
The bank can usually purchase assets at a higher cost than any one saver
The bank can pool the resources of larger savers and purchase lower
denominated assets NOT SURE
Economies of scale can be applied by the bank in its purchase of assets None of
the given options
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Q 17: The fact that a financial intermediary can use the same contract for many
customers is an example of: Select correct option:
Economies of Scope
The Law of Diminishing Marginal Returns
The Law of Increasing Opportunity Cost
Economies of Scale
Central bank
Commercial banks
Stock exchanges
Insurance companies
Q 19: What will be the effect on the present value if we double the future value of
the payment? Select correct option:
Q 20: Which one of the following is the narrowest definition of money? Select
correct option:
C
M1
M2
M3
MGT411 – Money & Banking
Online Quiz # 2
December 26, 2009
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Risk requires compensation
Cost of investment
Volatile
Stable
Non-existent
M2
M3
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Question # 5 of 20 ( Start time: 02:27:13 AM ) Total Marks: 1
Investors will hold higher compensation for the __________ investment.
Select correct option:
More risky
Less risky
Fixed return
Less dividend
Higher the default risk, higher the yield (see page # 53)
Borrowers needing large amounts of money would find it less costly to obtain the
funds
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Question # 8 of 20 ( Start time: 02:29:10 AM ) Total Marks: 1
When a bond becomes more liquid relative to its alternatives, the demand curve
for bonds shifts to the:
Select correct option:
One party to a transaction knows information the other party does not
Bond yield
Bond risk
Bond price
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Question # 11 of 20 ( Start time: 02:30:25 AM ) Total Marks: 1
An increase in the expected inflation shifts the bond demand to the _________.
Select correct option:
Right
Left
No change
Traveler’s checks
Demand deposits
Currency
Coupon securities
Consols
Preferred Bonds
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Question # 14 of 20 ( Start time: 02:33:14 AM ) Total Marks: 1
Debt instruments is categorized on the basis of which one of the following?
Select correct option:
Interest rates
Soneri Bank
Khushali Bank
Credit unions
The current dividend divided by the interest rate less the dividend growth rate
The annual growth rate of the dividend minus the interest rate divided by the
current dividend
The current dividend divided by the interest rate plus the dividend growth rate
The current dividend divided by the dividend growth rate less the interest rate
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Question # 17 of 20 ( Start time: 02:34:59 AM ) Total Marks: 1
Which of the following is true of a nation's central bank?
Select correct option:
It makes important decisions about the nation's tax and public spending policies
It lends only to the nation's largest and most important business firms
It is responsible for conducting the nation's monetary policy (see page # 96)
Higher
Lower
Equal to
No change
The future value of the coupon payments and the face value
Both The present value of the face value and of the coupon payments (see
page # 31 & 32)
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Question # 20 of 20 ( Start time: 02:37:36 AM ) Total Marks: 1
Which one of the following is NOT true for the expectation hypothesis?
Select correct option:
Left
No change
Triples
halves
3/4
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Question # 3 of 20 ( Start time: 12:10:22 AM ) Total Marks: 1
Which one of the following is the narrowest definition of money?
Select correct option:
M2
M3
The relationship between bond interest rates (yields) and bond prices
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Question # 6 of 20 ( Start time: 12:12:55 AM ) Total Marks: 1
A zero coupon bond:
Select correct option:
Does not pay any coupon payments because the issuer is in default
Pays coupons only once a year versus the usual twice a year
Mortgage loans
Pledge
Ordinary loan
Borrowers needing large amounts of money would find it less costly to obtain the
funds
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Question # 9 of 20 ( Start time: 12:16:11 AM ) Total Marks: 1
What is the true relationship that exists between default risk and yield?
Select correct option:
Higher the default risk, higher the yield (see page # 53)
Risk premium
Yield to maturity
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Question # 12 of 20 ( Start time: 12:19:20 AM ) Total Marks: 1
The____________ are an assessment of the creditworthiness of the corporate
issuer.
Select correct option:
Bond yield
Bond ratings
Bond risk
Bond price
Discounting
Compounding
Bond pricing
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Question # 15 of 20 ( Start time: 12:21:08 AM )
Which of the following institution take direct deposit from customer and give loan
to customer directly?
Select correct option:
Soneri Bank
Khushali Bank
Credit union
Idiosyncratic risk
Systematic risk
Risk premium
Unique risk
(It should be "Systematic Risk", but again not 100% sure) see page # 39.
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Question # 17 of 20 ( Start time: 12:23:42 AM ) Total Marks: 1
A bank can usually offer a saver a higher return for the same risk because:
Select correct option:
The bank can usually purchase assets at a higher cost than any one saver
The bank can pool the resources of larger savers and purchase lower
denominated assets
One party to a transaction knows information the other party does not
Downward sloping
Upward sloping for shorter maturities and downward sloping for longer maturities
Flat
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Question # 20 of 20 ( Start time: 12:26:38 AM ) Total Marks: 1
Which one of the following is true for financial intermediaries?
Select correct option:
The stockholders are paid any past due dividends before other claims are paid
The common stockholders are responsible for all corporate debts
relationship between the price and the interest rate for a zero coupon bond is
best described as:
Select correct option:
Volatile
Stable
Non-existent
Inverse
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Reference: The price of a bond and the interest rate move in opposite
directions
The overall level of the stock market should move higher continuously
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Reference: So long as stock prices accurately reflect fundamental values, this
resource allocation mechanism works well
What will be the result of the difference of real and nominal interest rate?
Select correct option:
If the annual interest rate is 6%, the price of a 1-year Treasury bill with $100 face
value would be:
Select correct option:
$94.00
$94.33
$95.25
$96.10
Which of the following would probably NOT earn an A rating from Standard &
Poor's:
Select correct option:
There is no guarantee that a bond issuer will make the promised payments is
known as which one of the following?
Select correct option:
Default risk
Inflation risk
Interest rate risk
Systematic risk
If a bond sells at a premium, where price exceeds face value, then we would
expect to see:
Select correct option:
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Market interest rate the same as the coupon rate
Market interest rates above the coupon rate
Market interest rates below the coupon rate
All of the given options
Reference: So, When Market Interest Rate < Coupon Interest Rate, Market Value
(or Price) of Bond >Par Value. Because when market is offering lower rate of
return then the bond then the bond becomes
valuable. This is known as a Premium Bond. Pg no.68 MGT201 H.outs
Facilitate Payments
Channels Funds from Savers to Borrowers
Enables Risk Sharing
Which of the following is the measure of likelihood that an event will occur?
Select correct option:
Risk
Probability
Frequency
Outcom
Reference: Because of limited liability, investor’s losses cannot exceed the price
they paid for the
stock Pg no.63 MGT411 H.outs
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